China’s export curbs on rare earths threaten global auto production, pushing companies to scramble for solutions as supply chains face unprecedented strain.
The global automotive industry is grappling with a critical challenge: a rare earths shortage triggered by China’s tightened export controls.
These minerals, essential for producing magnets used in everything from electric vehicle (EV) motors to windshield wipers, are overwhelmingly sourced from China, which controls about 70% of global mining and 90% of magnet production.
With factories at risk of shutting down and automakers in “full panic,” the situation could reshape the industry’s future if it worsens. What does this mean for car production, innovation, and global trade? Let’s explore the implications.
Why Is the Rare Earths Shortage So Alarming?
Why are automakers so concerned about the rare earths shortage? Rare earth elements, like neodymium and dysprosium, are vital for high-performance magnets in EVs and conventional vehicles.
An average EV requires about 0.5 kg of these minerals, while fossil-fuel cars use roughly half that amount. China’s dominance in the supply chain, mining, refining, and magnet production, gives it significant leverage. When China restricted exports in April 2025, citing trade disputes, the ripple effects were immediate.
European auto supplier plants have already shut down, and some companies warn of idle factories by mid-July without alternative supplies.
The panic stems from the industry’s heavy reliance on just-in-time manufacturing, where parts are ordered weeks in advance. A rare earths shortage disrupts this delicate balance, forcing automakers to rethink supply chains. If the situation worsens, could production halts become widespread? What might happen if China maintains or tightens these restrictions?
Could This Crisis Cripple Global Auto Production?
A prolonged rare earths shortage could devastate global auto production. With China reviewing hundreds of export permit applications, delays are inevitable.
European auto supplier association CLEPA warns that more plant outages are looming, potentially costing billions in lost production. For context, the 2021–2023 semiconductor shortage slashed millions of vehicles from production plans. A similar disruption now could hit harder, as EVs—central to the industry’s green transition—rely heavily on rare earths.
If the shortage persists, automakers may face tough choices. Could they produce cars without certain components, as some did during the semiconductor crisis, parking incomplete vehicles until parts arrive?
Mercedes-Benz is already exploring stockpiling strategies, but smaller suppliers may lack the resources to do so. A worst-case scenario could see production lines grind to a halt, delaying new car deliveries and inflating prices. How might this affect consumers and the push for sustainable transportation?
Are There Long-Term Solutions to the Rare Earths Dependency?
The rare earths shortage is spurring innovation, but solutions are years away. Automakers like General Motors and BMW are developing motors with low or no rare earth content, yet scaling these technologies remains costly and slow.
Companies like Niron, backed by GM and Stellantis, are working on rare-earth-free magnets, with production planned for 2029.
Similarly, Warwick Acoustics is developing rare-earth-free speakers for luxury cars, but mainstream adoption is five years off.
Diversifying supply chains is another focus. The EU’s Critical Raw Materials Act aims to boost local rare earth production, but progress is sluggish.
In the U.S., NioCorp’s Nebraska project won’t start until 2028. Japan’s experience after China’s 2010 export curbs offers hope. By 2018, it reduced reliance on China to 58% of its rare earth imports.
Could other nations replicate this? If not, what risks do automakers face by remaining dependent on a single supplier?
The rare earths shortage also raises geopolitical questions. China’s control over these minerals is seen as leverage in trade disputes, especially with the U.S. Recent talks between U.S. and Chinese officials suggest temporary relief, but long-term stability is uncertain. If tensions escalate, could this bottleneck become a tool for economic coercion?
What’s at Stake for the Future?
The rare earths shortage could reshape the auto industry and beyond. In the short term, production delays and higher costs may hit consumers, with EVs potentially becoming pricier or harder to find.
This could slow the global shift to electric vehicles, challenging climate goals. Long-term, the crisis may accelerate innovation in rare-earth alternatives and diversify supply chains, reducing reliance on China. However, these solutions require time and investment, leaving the industry vulnerable in the interim.
The situation also highlights the fragility of global supply chains. A third major disruption in five years, following semiconductors and COVID-related shortages, could push automakers to rethink manufacturing strategies. Will this crisis spark a broader shift toward regional production?
For now, automakers are in survival mode, scrambling for supplies and exploring workarounds. The outcome depends on diplomatic efforts, innovation, and the industry’s ability to adapt. As the rare earths shortage looms, one question lingers.
Can the auto industry navigate this crisis, or will it face a reckoning that reshapes its future, is yet to be seen!
